Consumers’ outlook darkens in July

Consumer sentiment fell to its lowest level of the year in early July, according to a preliminary reading from Thomson Reuters and the University of Michigan. The groups’ sentiment index fell to 72.0 at the start of July from 73.2 in June, according to an economist who has seen the report. This reading marks the lowest of the year.

Consumer sentiment rose steadily earlier this year, leading to hopes among some economists that household spending would drive economic activity and support the recovery process.

But slower job growth and other recent weak economic data have cut into both confidence and actual spending. The ever-evolving euro-zone debt crisis and the financial-market volatility it causes also continues to dent sentiment, which also fell in June.

“The latest confidence data suggest that although consumers remain cautious, at least they aren’t panicking,” the research firm Capital Economics wrote in a note to clients.

Economists surveyed by Dow Jones Newswires had expected the preliminary read in July to tick up to 73.5.

Consumers don’t expect a quick turnaround: The expectations index, an indicator of households’ hopes for the months ahead, dropped to 64.8 from 67.8. One silver lining came in the current conditions index, however, as the early-July reading rose to 83.2 from 81.5 at June-end.

Within the Michigan survey, the one-year inflation expectations reading sank to 2.8% from 3.1%. The inflation expectations covering the next five to 10 years stayed at 2.8%.

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